Auriga Industries A/S, Harboøre, Denmark, 2011-02-01 14:08 CET (GLOBE NEWSWIRE) -- Investor News
January 31, 2011
SHAREHOLDER LETTER
Business plan update – Cheminova preparing for the future
On Tuesday January 25, 2011, Auriga issued a company announcement updating Cheminova’s business plan from 2008. The business plan sets out the group’s overall targets and strategy based i.a. on a number of assumptions concerning developments within the industry and the market for crop protection products.
Highlights from the company announcement:
- Since 2008 strong growth from new products which are also expected to contribute to improving earnings in the coming years.
- Lower overall growth than expected in the business plan due to lower revenue from glyphosate and fewer acquisitions of products, activities and businesses.
- The target of a market share of 5% in 2015 is no longer realistic, but the strategy outlined in the business plan is maintained.
- Focus on higher earnings and reducing debt. Together with growth from new products, rationalisations and strict cost control will increase earnings in the coming years. Moreover, improvements in the working capital will contribute to reducing debt.
NEW PRODUCTS CONTRIBUTE JUST OVER DKK 1 BILLION MORE REVENUE THAN IN 2008
The cornerstone of the strategy is a comprehensive growth process, which involves the development and launch of many new products. A broader and better product programme is to improve the profit and make the business less dependent on single products. Consequently, fluctuations in demand due to climatic conditions and crop prices will be less pronounced than earlier.
Since 2008, we have successfully pursued this strategy. The new products have generated a growth in revenue of more than DKK 1 billion and account for 60% of revenue in 2010. We also have a strong development pipeline, and new products are thus expected to contribute significant growth in future too.
GLYPHOSATE SALES DOWN BY APPROX. DKK 1 BILLION SINCE 2008
Surplus capacity in the world market for glyphosate has significantly reduced earnings since 2008. Sales are down by approx. DKK 1 billion, and glyphosate now contributes a mere 15% of revenue compared to 33% earlier. In the years to come, sales of glyphosate are expected to stabilise at around 10% of revenue, which is substantially lower than originally assumed in the business plan.
LOWER THAN EXPECTED GROWTH FROM ACQUISITIONS
The acquisition of complementary products, activities and businesses was assumed to contribute considerable growth in revenue of more than DKK 2 billion in the period up until 2015. A precondition of this was continued consolidation among the largest players in the industry, which would lead to the divestment of product areas. However, consolidation has not continued in recent years. We therefore expect somewhat lower growth from acquisitions than originally assumed even though we will continue to pursue all relevant opportunities.
RATIONALISATIONS TO INCREASE EARNINGS AND PREPARE CHEMINOVA FOR THE FUTURE
The prospect of lower than expected growth is now leading to adjustments in capacity among Cheminova’s salaried employees. We expect to cut approx. 10% of our salaried jobs globally, with about half of the jobs being shed in Denmark. This will reduce our overheads by approx. DKK 75 million a year, and increase earnings.
A continuous reduction in debt will be an important focus area in 2011 and onwards. Growth and investments will primarily be financed through continuous improvements in the working capital relative to revenue and a positive cash flow from operations. This is the only way of financing the continued development of Cheminova through investments in new plants, developing new products and relevant acquisitions.
PRESIDENT & CEO KURT PEDERSEN KAALUND SAYS:
- I regret that our plan entails a number of job cuts among our highly competent employees who have all played an important role in the development up until now. However, we need to increase earnings and improve cash flows to finance future investments.
- Only by continuing on this path can we ensure that Cheminova will remain a strong and attractive company for the benefit of all stakeholders.
-
Read the company announcement of January 25, 2011, on www.auriga-industries.com
- The shareholder letter has been sent by ordinary mail to Auriga's registered shareholders
MORE INFORMATION:
AURIGA INDUSTRIES A/S
Investor Relations
Tel. +45 7010 7030
investor@auriga.dk
